ECARX Holdings Inc. Q3 FY2025 earnings call

• Achieved EBITDA breakeven in Q2 and recorded EBITDA of USD 8.3 million, becoming net profitable for the first time with net profit of USD 0.9 million.
• Revenue grew 11% year-over-year and 41% quarter-over-quarter to ~USD 219.9 million. Gross profit USD 47.6 million, up 39% year-over-year, gross margin 22%.
• Successful launch of multiple vehicle models with solutions, Pikes computing platform in mass production. Shipments ~667,000 units, up 51% year-over-year. Antora series shipments 196,000 units (record high).
• ~10 million vehicles globally incorporate ECARX technology. Secured multiple projects with global automakers, including second project with leading European automaker adding ~USD 400 million in lifetime revenue, total contracted lifetime revenue over USD 2.5 billion.
• Antora 1000 Pro received Automotive SPICE 4.0 capability Level 3 certification. Capabilities to integrate Google Automotive Service and intelligent manufacturing infrastructure provide competitive advantage.

Total revenue for the quarter was USD 220 million, up 11% year-over-year. Sales of goods revenue was USD 182 million, up 11% year-over-year. Antora, Venado and the Skyland platforms contributed 56% of total sales of goods revenue, with Pikes computing platform accounting for 9%. Software license revenue decreased 92% year-over-year to USD 0.9 million. Service revenue reached USD 37 million, up 68% year-over-year. Gross profit was USD 48 million, up 39% year-over-year, with gross margin at 22%.

• Q4 volume and revenue expected to reach historical highs. 2026 to maintain profitability momentum, with overseas business expansion and software collaboration driving growth. Target 30% overseas revenue by 2028 and 50% by 2030. Pikes platform and Antora families to offset seasonality impact in 2026 Q1.
• Raising USD 150 million in convertible notes to fuel international expansion, product innovation, and M&A opportunities.

Q: Congratulations on a very strong 3Q results. My first question is regarding your guidance for 4Q. You have previously guided second half volume to around 1.4 million to 1.5 million units. Is that still the same?

A: This is Phil. In quarter 3, we delivered 670,000 hardware units, a 51% year-over-year growth. We will keep strong momentum in Q4 for sure. And everybody knows that Q4 is the peak season and we see both volume and revenue will reach historical highs.

Q: Looking ahead into 2026, there are concerns that the overall industry is going to be weaker due to weakening government policy support and some pull forward demand into the fourth quarter. Do you expect a much weaker first quarter next year? Do you have a guidance for us for volume, revenue and profitability for 2026?

A: Yes. Q1 is normally the traditional low season within a year because the industry has a pattern. However, our disciplined execution of our product strategy like the rapid growth from our Antora families and the newly launched platform Pikes will carry on and will offset the low seasonality impact. And in quarter 3 and even in quarter 4, we will keep building enough backlog as much as possible and we will get ready for early delivery in Q1 to mitigate the so-called low seasonality. And we are also in 2026 financial planning season and according to our latest outlook projection, our customers' pipeline maybe also will further [indiscernible] growth in 2026. So what we need to do is just maintain our discipline, maintain our shares in those customers and focus on execution. Then we should be able to deliver relatively okay outlook in 2026 Q1. And meanwhile, as Peter just mentioned, we are expanding our global progress aggressively and we have lots of pipeline in our hands and we're also expanding our partnership with the global players. And now we are on track to realize the accelerated growth from those overseas business as well and software is one of the key, right? The software collaboration with the global customers, global OEMs is also one of our key growth drivers. So we will maintain the profitability momentum not only in Q4 this year, but kind of it will repeat in '26 and beyond.

Q: And my last question is regarding the overseas OEM business win that you just brought up. So I think during the last quarter call, you talked about you have 4 overseas project wins that totaled $1 billion in lifetime value and in 3Q, this has jumped to $2.5 billion. Can you maybe give us an update on how many new projects that you have won during the third quarter?

A: Yes. Mr. Huang, this is Peter Cirino. Maybe I'll take that question. I think as we reflect on our business, I think our fundamental belief as we look to grow ECARX into the European and the global marketplace was that we would be able to provide advanced technology solutions in the China market and then be in a unique position to scale those globally and work with all the European OEMs and bring that same industry-leading technology into the global marketplace. And I think we definitely see that fundamental belief coming to reality now. We've opened up a significant number of projects, as we mentioned, given the size of our pipeline with a number of different carmakers globally. Many of these carmakers in their high volume segments are starting to feel a lot of pressure as Chinese OEMs come to their domestic market and they're seeking new solutions that are industry-leading and very cost competitive. And I think ECARX is in a fantastic position to deliver those great solutions to those customers. So we mentioned another high volume win with a large European automaker that we secured this quarter. We have a very solid pipeline of both software and hardware -- software and full solution opportunities with both hardware and software in them. So I think our pipeline is definitely growing substantially and we'll be able to demonstrate I think significant wins as we go through 2026.

Q: This is Danlin Ren from CICC auto team speaking. Congratulations on your great results. And I have some follow-up questions for you. My first question is we are glad to see that we have won multiple orders from Geely Galaxy with sales ramping up quickly. Could you please elaborate on your production capacity planning and corresponding CapEx road map to support this growth?

A: Danlin, thank you for the question. We are continuing to scale our smart factory in the Fuyang, Hangzhou area to support all of our business in China. We've established that facility and continue to ramp it up as we've progressed throughout this year and we expect that to continue to ramp next year. So our capacity is at about 1 million units, which has more than doubled since last year and we will continue to grow our China facility for our China business. Globally, we're working with a number of manufacturing partners to expand in South Asia, in South America and in Europe to continue to support our supply chain needs in the global market and we expect to continue to scale those businesses as our global business expands as well.

Q: My second question is regarding your product lines based on several platforms. Could you provide updates on your ASP and gross margin levels, respectively, for your number one, your Qualcomm platforms?

A: Danlin, this is Phil. I'm happy to address your question regarding the ASP. Actually we launched several computing platform covering from entry level mainstream to high end market segment and the different solutions are addressing different market segment demand and we also manage the product mix selling according to customer demand. So basically the average selling price covers from RMB 2,000 to even RMB 4,000. That is RMB 2,000 to RMB 4,000 so that's the range. And from a hardware margin perspective, we are able to maintain something like a double digit 10% to 15%. That is our execution level. And I'd like to offer you more information like we always like to launch new platforms to the market to support customer demand. For example in quarter 3, we successfully launched our Pikes solution, which is Qualcomm 8295, and that is to support Galaxy M9 and Galaxy M10. And that also contributed to our ASP uplift in quarter 3 and that is a 9% improvement sequentially, as I mentioned earlier, and this momentum will continue and we have full confidence in our hardware margin mechanism.

Q: Very clear. And my last question is as the trend of integrating cockpit large models into vehicles continues to strengthen, could you share the company's strategic layout of R&D progress in this space?

A: Yes, sure. Danlin, thank you for the question. So for sure, ECARX has a full stack solution to support AI integration into vehicles. We're continuing to deploy solutions in China for China such as our DeepSeek integration to support an AI experience inside the vehicle. Additionally, we are building out our ECARX AutoGPT as a framework to provide end-to-end solutions for LLMs inside of vehicles and that's been launched in the Geely M9 and other vehicles this quarter like the Lincoln Code vehicles I mentioned earlier. Additionally, we are continuing to work with our global partners on similar developments for the European market and the Americas. At CES this year, we're quite excited to present our next-generation solution with AI integrated into the vehicle cockpit domain as well.

Q: First of all, congratulations on the very strong third quarter results. A couple of questions from me around the gross margins. I understand we've discussed a little bit about the improvement in the gross margins earlier, but I would like to have more elaboration on that front. So firstly, we've seen that hardware margins have improved to 15%, which is up from 10% in the last quarter and also 9% last year. May I understand more information, the driving factors behind this hardware gross margin increase? Is this related to the mass production of the Pikes computing platform and do higher end Qualcomm products typically command higher margins? And following up, last question on this margin, would this margin be sustainable going into the fourth quarter and also next year? So this is my first question.

A: To address your question regarding the margin performance in quarter 3. Yes, you are right. In the quarter, we executed pretty successfully in terms of the #1 portfolio selling. In quarter 3, we booked services revenue from many programs and which further pushed up our revenue mix from services and our margin as well and that is #1 strategy we implemented. The second thing is that we are able to manage our upstream supply chain cost pretty well. In the quarter, we managed to realize a decent cost down of our cost optimization through commercial negotiation and the VAV strategy as well and that is also beneficial for our gross margin improvement in hardware. And moving forward into Q4 and even in next year, I think the momentum will continue. And the strategy is working and we will further manage the hardware portfolio selling as well as the services software selling as well as the supply chain cost management.

Q: That's very clear. And may I just ask another follow-up question on the shipment. I'd like to understand more about the shipment mix specifically within ADAS. I would like to understand a little bit more how has the Skyland domain controller product sales performed in this quarter and in the recent quarter? And what is our outlook for the future ADAS domain controller shipment growth going forward?

A: Elizabelle, I was just going to say certainly the Skyland product has continued to grow. I think we're on a handful of vehicles in the Geely platform and continue to deploy to a few others as well. We also see a significant trend around fusion inside of the vehicle domain. So we're working very aggressively on deploying on our Antora platform as well as a next-generation platform as well a fusion solution that we'll bring into vehicles, which utilizes the capabilities that we've built with Skyland around ADAS as well as our cockpit solutions to provide a very cost-effective and advanced solution in vehicle to a number of different projects as we go forward. So I think we'll see that continue to develop as we go into next year and hopefully begin shipment in late '26, early '27.

Q: This is Nora from UBS. I have 2 quick questions for Mr. Ziyu Shen. So my first question is among your current order intake, what percentage is from overseas and how fast do you expect this number to increase in the next several years? And the second question is do you intend to enter into new business initiatives such as humanoid robot, et cetera? And what is your latest progress on LiDAR product development?

A: Nora, this is Ziyu speaking. Thanks for the questions. The first one, overseas revenue, we are strongly moving forward right now. So we are targeting 2028, we have 30% revenue of the company from overseas outside China. And 2030, we have 50% revenue of the company from overseas outside China. We already had very solid pipeline. Also we announced within the last few quarters, we already had accumulated USD 2.5 billion total overseas revenue order we already had. So we are still running forward next quarter. We will keep updated to the market. That's the answer for your first question. The second one, our flash-based LiDAR is very going well. We are full speed R&D with our first customer OEM for robotics provider in the market. So we believe we'll be ready to the market next quarter 4 2026. That's what we are targeting now. So everything is going well. We're confident on that. Yes, that's the second answer to you, Nora.

Q: My other questions have been asked so just 1 question for me. We've seen technology companies, SoC, semiconductor companies become sort of a key negotiating tool for trade talks. Can you just update us on what's changing on that front and how you're positioning the company sort of in this newer geopolitical environment?

A: Yes. Derek, this is Peter. Thanks for your question. As we look at our business as it continues to scale and grow, we're continuing, as we've talked about in many of these calls, to drive ECARX to be a global player in the automotive technology marketplace. We certainly see we've demonstrated with our products that we've launched on Volvo vehicles, the wins we've had with Volkswagen that we got to announce, the additional wins and potential programs in our pipeline that we have a clear ability to scale the technology globally, deliver very solid, mature, robust solutions into the market both on high volume vehicles as well as high technology applications. And I think we'll be continuing to grow the company in that direction. We announced earlier this year that we are launching a center in Singapore that will drive a lot of our global supply chain efforts. We'll house both in Singapore and throughout South Asia has a lot of our capabilities to deliver global solutions from those locations into OEMs in the European market and in the Americas. And I think we'll continue then to develop into a framework where we have a fantastic solution in China for China and high technology solutions that we're able to deliver to the global automakers in Europe and the Americas. So I think you'll see us continue to develop down that track.